Amazon Vs. Walmart: Clash Of The Titans

I was speaking recently at the PROJECT Conference in NYC when a fellow panelist, Joseph Ferrara, Co-Founder of Resonance Companies, mentioned the fact that we should be paying close attention to the epic battle between Amazon and Walmart. In one corner, we have the undisputed heavyweight champion of online retailing. In the other, the biggest brick-and-mortar retailer in the world.

As I watched these titans’ online pricing war during last year’s holiday season unfold - which I documented in a previous Forbes article - I began to wonder if the victor really will be decided by whoever wins the price battle. If so, how will it play out? One wins and then jacks up the price as soon as the other is mortally wounded? Or are there other factors in play?

Ultimately, I believe there are three things that will determine the eventual winner (or maybe more importantly, the loser):

A Boeing 767 Amazon.com "Prime Air" cargo plane is seen through curtains as it is displayed Thursday, Aug. 4, 2016, in a Boeing hangar in Seattle. (AP Photo/Ted S. Warren)

1) Amazon and Walmart: Know thyself - and your customers

As a whole, retailers need to step back and figure out who they truly are and how they serve their specific set of customers. This is a challenge when you choose products and assortments based on emotion, intuition and a fear-driven management style. Then, after being wrong long enough, these executives jump ship, only to repeat the same cycle every 2-3 years.

The only people winning are the headhunters and of course the executives landing the ridiculously high-salary jobs just to cover the fact that they can’t be assured long-term job security.

Retailers: Stop the madness! Use data to make decisions.

This is where Amazon is ahead of Walmart - for now at least. Amazon is well-known for its algorithmic approach to presenting particular products to its customers, as well as using real-time data to fuel dynamic pricing. Walmart, on the other hand, has lagged behind significantly when it comes to building a robust online platform that can even come close to Amazon’s. The absence of an online platform that can collect the volume and quality of consumer data needed for stronger decision-making has set Walmart back.

As the Wall Street Journal pointed out, Walmart’s e-commerce sales in 2015 totaled about $14 billion, which was just 3 percent of its $482 billion in total yearly revenue. As a comparison, Amazon’s sales hit $107 billion last year, a figure that includes its web-service division.

Walmart’s recent $3.3 billion acquisition of Jet, however, gives it a platform to compete with Amazon online, a sign that the retailer understands that it can no longer afford to have e-commerce be so dramatically subordinate to its core business. The acquisition of Jet solves some key problems for Walmart. Jet offers lower prices than Amazon by being a distributed marketplace of sellers rather than holding its own inventory. It’s also very data-savvy, taking into account things like customer shopping data, the basket size of each order and the particular merchandise it sells. With continued development, Jet should make Walmart’s e-commerce efforts much smarter and more aligned with what customers really want.

2) Total supply chain mastery matters

The goal for both Amazon and Walmart is to create a seamless shopping experience that blends the best of an in-store experience with a powerful and convenient e-commerce platform. People want to have complete flexibility in how they shop.

Amazon and Walmart are in a dead heat right now when it comes to supply chain expertise. Walmart has perhaps the best physical distribution and retail network in the world, while Amazon is the clear leader in the online space. Right now, each company has something the other wants and needs to be the total package.

So here’s the billion-dollar question: Will Amazon be able to build a massive distribution network and physical stores that beat Walmart’s before Walmart can add major digital capabilities to its own supply chain and fuse it with its stores? Inventory positioning will be key in order to implement same-day delivery. That will require accurately predicting demand by geography and by customer segment.

I believe this battle will be won based on who can take new customer data and use it to build a supply chain that will help them serve consumers exactly how they want to be served. Despite recent moves, neither company is excelling over the other at this right now.

3) Claim new turf and dominate it

When the opponent is of equal strength and capability, one must change the environment to his or her advantage. It will be imperative for one of these two competitors to change the battlefield. Online has been won by Amazon, brick-and-mortar stores by Walmart. What could be the new major battleground?

Some potential war zones are mobile, augmented reality and virtual reality. But when it comes to Amazon and Walmart, it’s another tie on all fronts.

In recent years, neither has demonstrated the innovation they were once known for, leading the rest of the retail pack into new territory. More niche retailers like Lowe’s and
Wayfair are moving rapidly into augmented and virtual reality, which will serve their customers nicely as their product offerings lend themselves to these visual aids. Walmart and Amazon also compete in these verticals, but if they can’t innovate like these smaller retailers, they’ll likely lose market share in the long term.

If either Amazon or Walmart is destined to come out on top, it has to come from a massive innovation push, a willingness to make mistakes and an effort to transform yet again.

By the way, these three points apply to all retailers and brands. So if you’re an investor, you should ask your portfolio companies what their strategies are in these three areas. If you are an executive of a retailer or brand, I’d do the same.

If you don’t get good answers, it just may be time to move on.

From early on Greg realized there was a better way for retailers to make decisions, and devoted himself to revolutionizing the retail industry. With decades of experience in retail, economics and growing SaaS businesses, Greg has helped to build First Insight, a technology c...